Thursday, December 31, 2015

Burlington Northern Santa Fe Corp. said Monday that bidders have until May 24 to make an offer on 277 miles of Inland Northwest rail lines for sale west and south of Spokane. A sale could close as soon as July 31.

As announced earlier, the lines offered for sale include a 108-mile branch from Cheney to Coulee City, Wash.; 122 miles from Marshall, Wash., to Arrow, Idaho; and 47 miles from Palouse, Wash., to Bovill, Idaho. The branch between Moscow and Arrow is abandoned; between Harvard, Idaho, and Bovill is shut down.

Washington state officials have said the lines are worth $5 million to $8 million. At least three companies have expressed interest: Blue Mountain Railroad, Montana Rail Link and Washington Central.

State officials said BNSF likely would abandon the lines if no buyer is found. Jim Sabourin, spokesman for the Ft. Worth, Texas-based railroad, said the company has no plans for abandonment.

BNSF said that it will strike reciprocal switching agreements with the short line carriers. The company it wants to sell the track, structures, right-of-way and station grounds, while retaining mineral, water, pipeline and fiber optic rights.

Wednesday, December 30, 2015

Two years after the state signed an agreement with an Illinois company to run trains on 110 miles of taxpayer-owned rail lines west of Spokane, the deal is in jeopardy over the struggling railroad's failure to maintain the old tracks.

The state has given notice that it's canceling its lease with the Eastern Washington Gateway Railroad, effective July 3.

"We felt we didn't have a choice but to issue the notice of termination," said rail project manager Mike Rowswell. "We do continue to talk."

Company officials say they feel they're close to a deal with the state to keep running on the line.
But even if that fails, rail service would continue on the line, which stretches from Cheney to Coulee City. Federal law would require the company to keep running on that line, known as the CW Line, until the state finds someone else, Rowswell said.

At issue is the railroad's maintenance of the tracks, some of which are more than a century old. The company acknowledges that it's replaced far fewer railroad ties than the thousands it committed to.
"It's our plan and goal to get those ties in" if the two sides can reach agreement, said railroad President John Howell. "We're hopeful we can reach a successful conclusion, but we're not sure yet."
"As far as the shippers go, they tell us that they were getting good service and they had good communication with the railroad," Rowswell said.

The rail line is part of the former Palouse River and Coulee City rail network that fans out south and west of Spokane.

Shortly after taking over rail operations in June 2007, Howell said, several problems hit the small railroad.

*Derailment: In December 2007, a derailment left the company with $100,000 in track damage that was not covered by insurance, Howell said.

*Grain cars: In 2008, the company wasn't able to borrow the state's fleet of grain cars. That forced it to spend about $170,000 leasing grain cars.

*Fuel costs: Diesel prices were extremely high last year.

*Harvest: Howell said last year's poor wheat harvest and low prices meant that the fledgling railroad didn't get as much traffic as it had expected.

"It was barely a trickle," he said. Wheat comprises "99.9 percent" of what the company ships on the line, he said.

Last year, Howell said, the railroad ran just 2,900 carloads on the line. Most of that traffic was during the first part of the year, when the wheat market was better. The wheat moves from rail to barge, through the ports of Portland or Seattle, and primarily to Asia.

Starting in 2004, Washington spent millions of taxpayer dollars to buy the former Palouse River and Coulee City rail network. The owner, Kansas-based Watco, was having trouble making a profit on the system, with trains moving at slow speeds on old track.

"Our rail is 100 years old," said Drew Wilson, another Eastern Washington Gateway Railroad official. "If you go out and look at the rail, it says '1908' on it."

Partly to avoid the prospect of thousands of truckloads of wheat on local roads, the state set aside nearly $28 million to buy the lines and rehabilitate the rail beds and track. Three different railroad companies now operate the network's three lines. The state owns the lines and regulates the railroads. Several area counties - Spokane, Whitman, Lincon and Grant - oversee the business and economic development aspects of the state's operating leases.

Rowswell said the other two lines are working well.

Under the lease, the Eastern Washington Gateway Railroad agreed to replace 3,000 old ties in the first year and 4,500 the second. Rowswell estimates that in the second year, they've only replaced about 900.

Howell said it's a bit more, maybe 1,000 or 1,100.

Regardless, he said, "It certainly was not the full amount of ties we'd committed to."

Howell said he feels the two sides are "very close" to working out a new agreement.
"We're hopeful we can reach a successful conclusion," he said. "But we're not sure yet."

The state has also been putting money into maintenance on the line. Rowswell estimated that Washington spent about $1 million in work on the CW line last year, with plans for another $1 million to $2 million next year.

Tuesday, December 29, 2015

Long gone are the elegant
passenger trains that once trundled West Coast-bound merchants and adventurers
across Oregon's sagebrush scrub and north through the rolling hills of the
Palouse.

But those Palouse rails remain,
some dating back to the 1890s. They carry only an occasional train now, usually
grain cars creeping across decaying ties and decades-old trestles.

Two years ago, the Palouse
River and Coulee City
Railroad (PCC) warned state officials that it would have to abandon
"significant sections" of its 372-mile network by 2006. The line
wasn't making enough money, the railroad said,
to cover maintenance costs and the debt from buying the lines in the mid-1990s.

The prospect of losing
the railroad has
alarmed many in the small towns the rails serve. Grain growers, seed companies,
farm chemical dealers and even an Idaho sawmill rely on the line to ship their
goods.

"It was a definite panic
button," said Pam Kelley, an economic development consultant for Lincoln
County. The rail line, she said, "is the lifeline of this region. If we
lose it, we're sunk."

That message apparently was
received in Olympia. This spring, state lawmakers approved several
transportation tax increases that will raise $4.1 billion over the next decade.
Included in the spending plan: $7.4 million to buy 302 miles of the PCC railroad this year. The
state also is setting aside $8 million in 2010 to repair bridges and reinforce
track so the line can carry newer, heavier cars.

It's not a done deal, however.
For the past several weeks, state technicians have been inspecting hundreds of
miles of track and combing the railroad's
books, trying to ensure that buying the rail line - or parts of it - won't turn
into an expensive albatross around the state's neck.

"We fully understand that
this is the people's money," said Stephen Anderson, rail services manager
for the state Department of Transportation.

"There's a lot of
political pressure for the acquisition. But if it goes into the red, how do we
explain to taxpayers that we've bought something that's (subsequently) running
in the red?" said A. Michele Maher, a Spokane freight consultant and a
member of the state transportation commission.

Washington has bought decaying
rail lines before, but never one this big. The results have been mixed.

In the mid-1990s, the state
bought a 25-mile stretch of track between Othello and Royal City, and another 20 mile line
from Toppenish to White Swan. The Othello-Royal City line died anyway, although another railroad has now offered to
restore service. The Toppenish-White Swan track has flourished, spawning two
new sawmills.

All along the PCC line,
companies and towns are waiting to see whether the state will save the railroad.

In Idaho, Brett Bennett's
family sawmills have relied on trains for decades. A PCC line stretches eight
miles into Idaho, to Bennett's sawmill in Princeton.

"It's a vital connection
to the world," he said. The mill ships three to five carloads of finished
lumber per week, much of it heavy white fir too expensive to truck. The lumber
goes throughout the American southeast; train cars full of the mill's shredded
bark decorate suburban landscapes in Colorado.

Bennett said he didn't know the
PCC railroad was
struggling until this spring, when a Latah County commissioner mentioned it.

"Somebody should have told
us," he said. "We'd have been beating that drum harder."

He's seen a rail line dry up
before. The family's Grangeville mill recently lost its rail connection. Now
the planed lumber is trucked to Kooskia, then put on a train - all of which
drives up the price of the family's lumber.

A hundred miles to the
northwest, entrepreneur John Graff feels the same worry. Graff is about to
start a livestock food-supplement plant at Creston, in Lincoln County. That
means bringing in railcars full of Midwestern corn, soybean meal and molasses
on the PCC line. It's blended into nutrient-rich feed for cattle, horses, hogs
and chickens, then shipped back out on rail.

If everything had to come and
go on trucks, Graff said, the expense would shut down half his operation.

"I'm a free-enterpriser,
so I don't like state involvement in anything," he said. "But making
sure this line is going to be here is a good thing for us."

Is it also a good thing for
Washington taxpayers? A state Department of Transportation report in February
painted a pretty grim financial picture for the PCC. Due to grain-shipping
competition from Columbia River barges and millions of dollars in backlogged
maintenance, the report concluded, much of the line was "not viable in the
long run."

But proponents of the deal
argue that an injection of state cash would turn things around. Watco, the
Kansas-based company that owns the PCC railroad, wants the state to buy the tracks and lease
them back to the company, which would continue to run the trains. That would
ease the company's debt load.

If the state then, as planned,
pours millions of dollars into upgrading the track, trains could run faster and
pull bigger cars. Those efficiencies, Watco argues, would sharply reduce
operating costs and make the line profitable.

"This is not one of those
`60 Minutes' deals where the state buys a pig in a poke," said Ed
McKechnie, Watco's vice president for strategic development. "It makes
sense for the state to buy it, and I think it will."

He wouldn't say what Watco paid
for the tracks when it bought them from bigger railroads in the mid-1990s. But he said Watco's
asking price - about $10 million - is just the scrap value of the steel and the
wooden crossties. The state agrees with that assessment.

Proponents also make a
flip-side argument: If the state doesn't save the railroad, truck traffic would surge. Highways would
crumble faster. Trucking companies, with less competition, would likely raise
rates. And businesses and jobs would disappear from already- struggling small
towns.

State transportation analysts
agree. The PCC railroad keeps
more than 29,000 heavy truckloads off state and county roads each year, the
February report concluded. Losing the rail line, analyst Ray Allred said, would
annually cost local shippers $2 million more, cause $4 million more in damage
to state and county roads, and erase $6 million worth of local jobs.

The Department of
Transportation's advice to state budget writers was simple: buy it.

"All forms of
transportation get some form of public subsidy," said Anderson, the state
rail manager. "The highways have all been paid for by taxpayers. And there
are legitimate public values to having these railroadsout there."

Monday, December 28, 2015

More than 400 miles of railroad lines critical to the export of Inland Northwest wheat and lumber were sold Monday to buyers from Florida and Kansas.

Lines west and south of Spokane and north of Wenatchee were sold by Fort Worth, Texas-based Burlington Northern Santa Fe Corp. as part of the company's nationwide move to unload thousands of miles of lightly used track.

Palouse River and Coulee City Railroad Inc., a newly created company affiliated with Pittsburgh, Kan.-based WATCO shortline railroad and locomotive repair firm, purchased 277 miles of track from Coulee City, Wash., to Arrow, Idaho.

Cascade and Columbia River Railroad Co., a subsidiary of RailAmerica Inc., a Boca Rotan, Fla.based short line company, bought another 131-mile line that runs from Wenatchee to Oroville.

Terms of both sales were not disclosed.

But officials from the companies promised no disruption of service that delivers carloads of wheat, lumber and other products to major BN lines connecting to the ports of Seattle and Portland.

"For the farmer, this is real critical," said Kevin Whitehall, assistant manager of the Central Washington Grain Growers, which operates seven rail loading facilities along the Coulee City line. "It's cheaper to ship by rail than truck. If we had to ship everything out by truck, farmers would have to pay for it."

BN offered the lines for sale earlier in the year, triggering speculation that it would abandon the track if no buyers stepped forward.

Jim Jackson, a rail expert with the Washington state Department of Transportation, had estimated that theCoulee City and Palouse lines alone would cost $9 million to $15 million. At that price, he said, few shortlines could afford to keep the lines open.

Rick Webb, president of WATCO and the Palouse River and Coulee City Railroad, was unavailable for comment. Company officials at WATCO headquarters in Kansas said the company is opening an office in Colfax.

The Palouse River and Coulee City Railroad will operate 108-miles of track from Coulee City to Cheney; 122 miles from Marshall, Wash., to Arrow and 47 miles from Palouse, Wash., to Bovill, Idaho.
A segment of track from Moscow to Arrow has been out of service since 1984. A spokesman said it was unlikely the line would reopen soon.

The Northcentral Washington short line is the first acquisition in the West for Columbia River Railroad, which has an office in Omak, Wash. The line hauls wood chips, lumber, plywood, ground limestone, wheat and frozen foods.

A company spokeswoman said the line should generate $3.5 million in annual revenue. In a statement, RailAmerica chief executive officer Gary Marino said "we are confident that we can significantly increase the traffic base on this line."

The Wenatchee-to-Oroville line is the ninth railroad acquired and operated by RailAmerica. The company operates more than 600 miles of track in the Midwest and South, the company said.

Sunday, December 27, 2015

A 108-mile freight line that connects Cheney to Coulee City, Wash., was deteriorating and headed for abandonment until Eastern Washington grain shippers, legislators, and the state Department of Transportation stepped in to help save it.

A 108-mile freight line that connects Cheney to Coulee City, Wash., was deteriorating and headed for abandonment until Eastern Washington grain shippers, legislators, and the state Department of Transportation stepped in to help save it.

Although the former Burlington Northern Santa Fe Railroad Corp. spur still is many millions of dollars away from being in prime shape, its condition has stabilized and its future looks brighter than it has in years.

Its current owner, Palouse & Coulee City Railroad Inc. (PCC), which bought the line from BNSF in September 1996 and employs about 20 people, hopes to make the line profitable by the year 2000.
PCC says it has hauled nearly 9,000 rail-car loads of cargo--mostly wheat and barley, but also some peas, lentils, fertilizer, and finished lumber--over and is looking to boost its volume this year.

"We have a real ability to increase it," with added support from shippers along the line so long as PCC can round up enough grain cars to meet demand, says company executive Mark Blazer.
Blazer is regional vice president of the railroad, which is based in Colfax, Wash., but owned by a Pittsburg, Kan., family. He holds the same title for several other companies owned by that family that are based or have operations in the Inland Northwest. Those companies include Blue Mountain Railroad Inc., of Walla Walla; Titan Railway Services Inc., which operates a locomotive and rail-car repair facility in Pasco; and Watco Inc., an industrial-switching company that moves rail cars for customers. Watco is based in Pittsburg, but has a regional office in Winston, Mont., and other offices in Wallula and Cosmopolis, Wash., and Springfield, Ore. Blazer works out of his home in Montana.

PCC has 11 locomotives, 52 of its own grain cars, and 29 cars that it leases from Washington state. Its rail system includes an 89-mile, Marshall-to-Moscow, Idaho, line that it bought at the same time it bought the Cheney-Coulee City line.

The latter line is the sole source of rail service for grain shippers in Coulee City, Hartline, Almira, Wilbur, Creston, Davenport, Reardan, and Medical Lake. Blazer says all of the grain that's picked up along the line eventually is taken to the Pacific coast for export. PCC transfers the loads over to BNSF at Cheney for the remainder of the trip, he says.

Early last year, the Federal Railroad Association downgraded the Cheney-Coulee City line to Class 1 status, which has a 10 mph maximum train speed, from Class 2, for which the maximum speed is 25 mph, because of the line's deteriorating condition. That change boosted the number of crew members needed to make a run and dramatically increased the tiny railroad's operating costs, Blazer says.

With help from state Sens. George Sellar, R-East Wenatchee, and Bob Morton, R-Orient, and the state Department of Transportation, PCC was able to secure a $610,000 low-interest loan last summer from the state-funded Essential Rail Assistance Account to upgrade 65 miles of the 108-mile track and return it to Class 2 standards. Six local farmers' coops formed the Coulee City Line Rail Shippers Association and raised an additional $200,000 in required local matching funds.

The upgrade project was to include replacing about 19,000 defective crossties. PCC had a Kent, Wash.-based company put in all but about 5,000 of the crossties, then ran out of funding for that work, and so has been installing the remaining new crossties itself, Blazer says. It hopes to complete that work this summer, but the 65-mile section of track already has been returned to Class 2 standards, he says.

Nevertheless, much work remains to be done. The crosstie-replacement work simply gives PCC some time to seek out funding sources for an estimated $6.5 million that's needed to renovate the Cheney-Coulee City line fully.

The railroad hopes to obtain federal grant money to pay for those improvements, Blazer says. But, he adds, "Numerous (railroad) short lines have been created in the state, and we'll have to compete with them for that money."

The big renovation expense is separate from basic maintenance costs, which PCC estimates at $4,000 a year per mile of track.

One person who's rooting for the railroad to succeed is Ray Allred, a state DOT rail-planning specialist who helped review and process PCC's application for the Essential Rail Assistance Account loan.

"We've lost close to 40 percent of our (state) rail system to abandonment in the last 25 years," he says. "We've gone from about 5,000 miles down to about 3,100, of which about 1,600 are light-density lines that are vulnerable to abandonment, and it has impacted our highway-maintenance costs dramatically."

A benefit-to-cost analysis done by the state as part of the PCC loan application review found, for example, that abandonment of the Cheney-Coulee City line would add nearly 15,000 heavy truckloads of grain to the state's highways annually, increasing highway maintenance costs by more than $3 million a year, Allred says.

The problem for many short-line railroads, he says, is that they can't get loans from private lenders to rehabilitate their tracks because they can't show adequate collateral, and the main federal-support program, called the Local Rail Freight Assistance Program, no longer is being funded.

"The state is about the last resort of public-sector funding to rehabilitate the short lines, " Allred says, but he adds that "our funding hasn't gone up at all." The DOT is considering nine loan applications from short-line railroads for amounts totaling about $4.4 million, but has only about $1 million to dole out through the Essential Rail Assistance Account over the 1997-to-1999 biennium, he says.
Gov. Gary Locke, in his transportation budget, has proposed another $1.6 million in funding for freight short-line rehabilitation this biennium, but it remains to be seen whether the Legislature will approve that proposal, Allred says.

Regarding PCC's hopes that it can obtain some federal grant money, Allred says that U.S. Sen. Slade Gorton has proposed including some money for freight rail line rehabilitation in the Intermodal Surface Transportation Efficiency Act, which is up for reauthorization this year. That proposal, too, however, might not be approved, Allred says.

The DOT's rail office estimates that basic maintenance costs for railroad branch lines in the state are between $12.7 million and $18.2 million a year. But small railroad associations "are only making enough revenue to maintain half of the track," Allred says, "so unless the state steps in, a lot of them are going to go out of business in a few years.

Saturday, December 26, 2015

From the start, a key argument for the state's purchase of PCC's decades-old rail lines has been pragmatic. Without rail, proponents said, the region's roads would crumble as more trucks haul grain and lumber to barges or distant rail loaders. Keeping these short-line tracks running, it seemed, would cost less than forever rebuilding the roads.

Until 1999, according to a WSU study this spring, competition between barges and rail kept rail shipping rates at 1930s prices. If the option of rail shipment disappears, some growers worry, truckers and barges will have less reason to hold their rates down.

[Barbara Ivanov] told a Senate committee this fall that the national rail trend is toward large, long-haul "unit trains" with a single commodity. It's harder and harder, she said, for small shippers to get a few carloads accepted by big railroads. Soaring rail volume has put rail space at a premium. Low-volume shippers of wheat, apple, potato and wood-products in Washington are left struggling to adapt to what she called that "fundamental change" in BNSF's and Union Pacific's business model.

Two years ago, moved by pleas from grain growers and local communities, state lawmakers spent $6.5 million to buy about 200 miles of Palouse River and Coulee City Railroad line. The state is now negotiating a price for the final 108 miles of the ailing railroad's track, with a deal expected by January.

Growers argue that the line is critical. "If the rail was not there, the people that would suffer the most would be the farmers," said Bob Holmes, general manager of Whitman County Growers. "The whole economy in our part of the state is based on agriculture. It's substantial. If all of a sudden you make it so the farmers all go away, so will half the towns in Eastern Washington."

But buying the tracks, it now seems, was just a down payment. A study last year suggested that unless grain growers or other users boost their rail shipments and thus revenue to levels not seen in years, significant parts of the system may never become self- supporting. Keeping the railroad running, the Washington State University report said, may require "continuous state investments" of $500,000 to $1.4 million a year.

The predicted cost is even higher in a new state Department of Transportation study, which a few lawmakers learned about in September. Over 15 years, it said, taxpayers will spend between $41 million and $49 million to keep the struggling short-line system alive.

Barbara Ivanov, the state DOT's freight strategy director, alluded to those looming costs during a September Senate hearing in Spokane.

"I want to point out," she said, "that annual track maintenance and any ongoing state subsidy are not included in the current state budget."

"It got my attention," state Rep. Alex Wood, D-Spokane, said of the new study. "If the state is going to step into that, how do we pay for it?"

Last year, the rail system's Kansas-based owner, Watco, said it couldn't keep losing money on parts of the system. In December, the company halted shipments on a branch west of Spokane. Service was restarted only after the state complained to federal regulators. Now that the state's taking over the track and the operating rights, lawmakers have to figure out what to do with the system.

"We have to make some tough decisions," said Wood. "Do we subsidize it? Do we take it over as a purely state entity? Do we do a public-private partnership with someone?"

The state has committed itself to buying the old tracks to prevent them from being torn up. But it hasn't committed to keeping the lines going over the long term. The state has a "rail-banking" program, in which it buys lines simply to preserve them for a potential future use. "You can purchase to preserve," said Scott Witt, DOT's freight multimodal program manager. "You don't necessarily have to operate."

Wood said that some Western Washington lawmakers are floating the idea of ending rail service on parts of the PCC line in hopes of spurring local growers into committing to more shipments. Wood opposes that but predicts "a lot of interesting discussions" about the railroad's fate when lawmakers convene in January.

"It's just like the ferry system: How in the hell do we make this self-sustaining for the next 20 years?" Wood said. "And I don't have the answer."

It didn't help matters this August when a combine-triggered brush fire near Colfax torched a 200-foot, decades-old wooden trestle on a southern part of the system.

Initially, proponents had hoped the state would improve the old track enough to run trains at 25 mph, instead of the current 10. That efficiency would mean lower costs, they predicted, and more business for the struggling lines.

But doing so would take considerable track work, Witt said.

"The odds are it will never be up to 25 mph," he said. "It would take a lot more money and a lot more customers."

From the start, a key argument for the state's purchase of PCC's decades-old rail lines has been pragmatic. Without rail, proponents said, the region's roads would crumble as more trucks haul grain and lumber to barges or distant rail loaders. Keeping these short-line tracks running, it seemed, would cost less than forever rebuilding the roads.

But maybe not.

A new study by a DOT-hired expert on pavement and grain shipping suggests that it would be cheaper for taxpayers - a lot cheaper - to let the rail service on some branches die away and just keep fixing the truck-scarred roads forever.

Take the so-called P&L branch, a stretch of track that runs from the Marshall area south to Pullman, plus a short spur into Idaho. Over 15 years, the DOT study says, the public cost of keeping that line going will be $14 million to $17 million. Fixing local and state roads, on the other hand, would cost just $2.5 million.

The projections were equally as stark for a second stretch of state-owned track: the three-legged "PV Hooper" branch, which stretches from Hooper to Thornton to Moscow, Idaho. The 15-year rail cost: $9 million. Fixing the roads: $2 million.

The only place where the rail-versus-roads savings assumption held true, according to the study, was on the third branch of the system. The CW line runs from Cheney to Coulee City. Rail cost: $18 million to $24 million. Road cost: $18 million to $45 million.

Growers and some local lawmakers say the benefits of keeping the rail service alive extend far beyond pavement.

"Obviously, you have to look at the financial costs, but when you add that number of grain trucks to all the other trucks on the road, look at the traffic numbers," said House transportation committee member Rep. Lynn Schindler, R-Otis Orchards. Without the railroad, she worries about highway safety and gridlock during harvests.

And until 1999, according to a WSU study this spring, competition between barges and rail kept rail shipping rates at 1930s prices. If the option of rail shipment disappears, some growers worry, truckers and barges will have less reason to hold their rates down.

"Any time you do away with an alternative, you are certainly going to increase the cost of the other alternative. ... I really would not want to lose that (rail) option," said Holmes.

The seemingly obvious solution - make the short-line system self- supporting by using it more - is more complicated than it sounds, he said. The mainline railroads like BNSF Railway Co. could kneecap any such agreement simply by raising their rates to accept those short-line rail cars and avoid the inefficiency of repeated stops for small loads.

And Ivanov told a Senate committee this fall that the national rail trend is toward large, long-haul "unit trains" with a single commodity. It's harder and harder, she said, for small shippers to get a few carloads accepted by big railroads. Soaring rail volume has put rail space at a premium. Low-volume shippers of wheat, apple, potato and wood-products in Washington are left struggling to adapt to what she called that "fundamental change" in BNSF's and Union Pacific's business model.

Under a complex deal intended to keep rail service running on the Palouse River andCoulee City Railroad lines, Washington state has bought - or is buying - the private company's hundreds of miles of track. For now, however, the short-line railroad retains its operating rights to run trains on those lines. The state is negotiating to buy those operating rights. Once that's done, Washington lawmakers must decide whether to run a state-owned rail system, lease the lines to a port or other public entity, or "railbank" the tracks by halting service and preserving them for possible future use.

Friday, December 25, 2015

State transportation officials have worked out an agreement with the Eastern Washington Gateway Railroad to keep the company running trains on 110 miles of taxpayer-owned track west of Spokane.
The new agreement sets up benchmarks - such as paying creditors and replacing railroad ties - to keep the company operating on the line over the long term, said Scott Witt, rail and marine division director for the state Department of Transportation.

The line runs from Cheney to Coulee City.

In December 2008, the department "became concerned about EWG's financial condition," according to a statement from the agency, and said the state would terminate the company's operating lease this year.

The company was not keeping up with required track maintenance, including replacing thousands of railroad ties.

The threat to end the lease "was real," Witt said. The main concern, he said, was replacement of the old ties.

The railroad company, which began operation on the line in June 2007, says it spent an unexpected $270,000 to rent grain cars and repair track damaged in a derailment.

Also, last year's poor wheat harvest and low prices meant that traffic on the line was far less than expected, EWG officials have said.

Worsening matters, diesel prices reached record highs last year.

After negotiations, state officials this month rescinded their plan to end the lease.

"However, the new agreement sets financial and operational benchmarks that EWG must meet in order to keep operating so that further difficulties can be avoided," the agency said.

The line is part of the former Palouse River and Coulee City rail network, which comprises three main branches across the Palouse and west of Spokane. The state bought the old rail system and has set aside millions of dollars to repair the tracks, some of which are more than a century old. The total allocated so far: $28 million.

Thursday, December 24, 2015

About a dozen representatives of the wheat and grain industry gathered at the state Capitol this morning (Wednesday) in the governor's conference room with Rep. Mike Armstrong. They and an official of the Palouse River and Coulee City Railroad were waiting for Gov. Christine Gregoire's arrival and her signature on a document that would begin the sale of an Eastern Washington short-line railway to the state of Washington.

"How are you?" the governor asked as she walked through the door.

"We're excited, governor!" said Armstrong with a smile on his face.

"This is a day to celebrate," noted the governor as she sat at the conference table preparing to sign the memorandum of understanding.

The document defines the sale process between Watco Companies Inc., owner of the CW Branch rail line, and the state of Washington. The rail line is located between Coulee City and Cheney.

With the prices of steel so high, Armstrong said Watco at one time had considered removing the track and selling it for scrap.

"Money had been set aside in 2003 to purchase a number of short lines. This rail line was supposed to have been one of them. However, the Department of Transportation never got the deal put together. Somehow this line got overlooked," said Armstrong, R-Wenatchee. "Watco decided since the steel prices were so high, they could get more money out of scrapping it than operating it. That would have left our wheat farmers high and dry.

"Our local farmers needed that line badly to transport grain, so they came to me in December of 2005 asking for help. I called Senator Bob Morton, Senator Mark Schoesler and Representative David Buri to get their help," added Armstrong. "We've been working since that time to negotiate this memorandum of understanding between the rail owner and the state, which sets forth the process for the state to purchase this line."

"Representative Armstrong was the first legislator we contacted about this issue in December 2005. He has been very instrumental all the way through this process, and he's been the lead legislator on this whole project all the way through to the conclusion," said L. Kevin Whitehall, general manager of Central Washington Grain Growers, Inc., in Waterville.

The memorandum of understanding also includes the purchase of the P&L Branch line in the Pullman area, the Hooper line between Pullman and Hooper, a portion of the WIM line between Palouse and the Washington-Idaho border, and a portion of the rail line between Thornton and Winona. Sale price of the lines is just over $7.9 million.

Armstrong said once the purchase is final, the state will accept bids for an operator.

"It's a huge victory for our farmers to keep these lines open. We estimate that there'll be 4,000 carloads of wheat from that plateau each year. It also allows them a way to haul in their fertilizer," noted Armstrong. "The other victory is for the county road department. It keeps trucks off those roads that would do a lot of damage. Local governments, such as Douglas County, cannot afford to repair those roads once they are damaged."

Armstrong said the grain would be transported to Ritzville where it is transferred to container cars that would be trucked to the Columbia River.

"This will save our growers thousands of dollars a day from this day to generations to come. It will keep those growers competitive in the marketplace where they would not have been as competitive without that line," added Whitehall.

Back in the governor's office, representatives from Central Washington Grain Growers stood next to Armstrong, Rep. David Buri, R-Colfax, and the governor as she and Watco Senior Vice President Mark Blazer signed the memorandum of understanding.

As Armstrong prepared to shake the governor's hand, he added, "It's been a long process. However, good things happen when we all stick together and work together."

Under the terms of the understanding, the sale should be closed by Feb. 28, with final payment made by Sept. 30, 2007.

Wednesday, December 23, 2015

The Washington State Department of Transportation (WSDOT) announced today that it successfully completed negotiations with the Eastern Washington Gateway Railroad (EWG), allowing the EWG to continue operating the CW Branch (Cheney to Coulee City) of the state-owned PCC Rail System.
The PCC rail system provides local rail service to grain shippers and other businesses, mostly in agricultural areas of Eastern Washington.

In December 2008, WSDOT became concerned about EWG's financial condition and issued a Notice of Termination of EWG's operating lease in early March. Despite the termination notice, WSDOT and EWG continued to discuss solutions.

WSDOT rescinded the Notice of Termination pursuant to the new agreement. However, the new agreement sets financial and operational benchmarks that EWG must meet in order to keep operating so that further difficulties can be avoided. The first set of benchmarks must be met by April 6, and others must be met on an ongoing basis throughout 2009.

"Everyone is hopeful that EWG will be able to continue to provide the excellent service it is known for, and also to meet its obligations," said WSDOT Rail and Marine Division Director Scott Witt. Witt also thanked the PCC Rail Authority and the shippers along the CW Branch for their support of the process that led to the agreement.

WSDOT began acquiring PCC Railroad assets in 2004 to provide an opportunity to create a viable railroad system able to serve Washington shippers. The state-owned rail line offers lower shipping costs; preserves jobs at rail-dependent industries; and minimizes the added wear and tear on state roadways caused each year by thousands of heavy truckloads.

WSDOT purchased the rights of way and rail in the P&L Branch and PV Hooper Branch of the PCC in November 2004. Purchase of the CW Branch (Cheney to Coulee City) and the remaining rights in the other two branches was completed in May 2007.

EWG was selected in May 2007 to operate the Branch through a competitive request for proposal process. Watco operates the PV Hooper Branch and the Washington & Idaho Railway operates the P&L Branch.

In spring 2008, The PCC Rail Authority was formed to assist WSDOT in administering the business and economic development portions of the operating lease entered into with EWG.

Tuesday, December 22, 2015

The Washington State Department of Transportation (WSDOT) announced today that it is terminating an operating lease with Eastern Washington Gateway Railroad (EWG), the railroad company responsible for operating the CW Branch of the state-owned Palouse River and Coulee City (PCC) Rail System.

"The decision to terminate the lease was difficult. The EWG provided good service and excellent communication with the shippers," said Scott Witt, State Rail and Marine Director. "Unfortunately, the EWG encountered unexpected set-backs and costs, and has not been able to meet some of the maintenance and tie replacement requirements of the operating lease."

WSDOT, with help from the PCC Rail Authority, will develop a transition plan while a Request for Proposal process moves forward to secure a new operator.

The PCC rail system provides local rail service to grain shippers and other businesses, mostly in agricultural areas of Eastern Washington. WSDOT began acquiring PCC Railroad assets in 2004 to provide an opportunity to create a viable railroad system able to serve Washington shippers. The state-owned rail line offers lower shipping costs; preserves jobs at rail-dependent industries; and minimizes the added wear and tear on state roadways caused each year by thousands of heavy truckloads.

WSDOT purchased the rights of way and rail in the P&L Branch and PV Hooper Branch of the PCC in November 2004. Purchase of the CW Branch (Cheney to Coulee City) and the remaining rights in the other two branches was completed in May 2007.

EWG was selected in May 2007 to operate the Branch through a competitive request for proposal process. Watco operates the PV Hooper Branch and the Washington & Idaho Railway operates the P&L Branch.

In spring 2008, The PCC Rail Authority was formed to assist WSDOT in administering the business and economic development portions of the operating lease entered into with EWG.

On June 26, 2006, the State of Washington filed a complaint alleging that the Palouse River and Coulee CityRailroad, Inc. (PCC) violated its common carrier obligation under 49 U.S.C. 11101 and discontinued operations between Cheney, WA, and Coulee City, WA, without authorization under 49 U.S.C. 10903 and 49 CFR 1152. PCC filed an answer to the complaint on July 14, 2006.

In a letter dated August 1, 2006, counsel for the State of Washington and PCC indicated that, pursuant to 49 CFR 1111.10(a), the parties had conferred by telephone, and proposed a procedural schedule to govern this proceeding. The Board adopted that schedule by decision served August 8, 2006.

By letter filed August 22, 2006, the State of Washington has now requested voluntary dismissal, without prejudice, of its complaint, in light of the resumption of rail service. The request will be granted.

This action will not significantly affect either the quality of the human environment or the conservation of energy resources.

It is ordered:

1. The State of Washington's request to dismiss its complaint without prejudice is granted.

Sunday, December 20, 2015

The Washington State Department of Transportation (WSDOT), a noncarrier, has filed a notice of exemption under 49 CFR 1150.31 /1/ to acquire from Palouse River and Coulee City Railroad, Inc. (PCC), certain physical assets, operating rights, and underlying rights-of-way of eight rail lines (the Lines), totaling approximately 296 miles, in the State of Washington. The Lines are sub-divided into three branches: (1) The CW Branch, between milepost 1.0 at Cheney and milepost 108.81 at Coulee City; (2) the P&L Branch, consisting of (a) the WIM line between milepost 0.0 at Palouse and milepost 3.85 at the Washington-Idaho State line, and (b) the P&L line between milepost 1.0 at Marshall and milepost 75.9 at Pullman; and (3) the PV-Hooper Branch, consisting of (a) the Hooper Jct.-Winona line between milepost 26.6 at Hooper Junction and milepost 52.3 at Winona, (b) the Thornton-Winona line between milepost 0.0 at Winona and milepost 31.7 at Thornton, (c) the Winona-Endicott line between milepost 52.3 at Winona and milepost 57.9 at Endicott, (d) the Endicott-Colfax line between milepost 57.9 at Endicott and milepost 77.7 at Colfax, and (e) the Colfax-Moscow line (i) between milepost 0.0 at Colfax and milepost 18.7 at Pullman, and (ii) between milepost 75.9 at Pullman and milepost 84.05 at the Washington-Idaho State line.

FOOTNOTE 1 This notice was initially submitted on May 10, 2007, but not docketed until May 21, 2007, when the appropriate filing fee was submitted. Because the notice could not be processed until the Board received the filing fee, May 21 is the official filing date. END FOOTNOTE

WSDOT states that it is in the process of formalizing a Purchase and Sale Agreement with PCC, pursuant to which PCC will: (1) Convey to WSDOT certain track and track structures and the rights-of-way underlying the involved Lines; (2) continue to operate the CW and P&L Branches through May 31, 2007; and (3) continue to operate the PV-Hooper Branch under its existing 15-year lease with WSDOT. /2/ WSDOT will lease the P&L and CW Branches to third party operators under contracts awarded by public bid. /3/ WSDOT will not operate the lines, but will retain the residual common carrier obligation should the operators prove unable to perform. WSDOT is acquiring the Lines in order to preserve freight rail service for the public in Eastern Washington.

FOOTNOTE 2 WSDOT recites that PCC will also retain an "exclusive freight rail easement" to provide service under the lease. However, because WSDOT recites that it will acquire the common carrier obligation for the PV-Hooper Branch, PCC's interests after this transaction cannot constitute an easement interest and apparently will be in the form of a leasehold only. While the notice filed by WSDOT is somewhat ambiguous, the fact that it asserts it will obtain a common carrier obligation and the fact that it has invoked Board authority to acquire ownership of the Lines indicates that it is acquiring the right to operate over the Lines, and intends to execute leases with other carriers, including PCC, to satisfy WSDOT's common carrier obligation. END FOOTNOTE

FOOTNOTE 3 Related notices of exemption have been filed in: (1) STB Finance Docket No. 35028, Washington & Idaho Railway, Inc.--Lease and Operation Exemption--Washington State Department of Transportation, wherein Washington & Idaho Railway, Inc., seeks to operate over the P&L Branch; and (2) STB Finance Docket No. 35029, Eastern Washington Gateway Railroad Company--Lease and Operation Exemption--Washington State Department of Transportation, wherein Eastern Washington Gateway Railroad Company seeks to operate over the CW Branch. END FOOTNOTE
WSDOT certifies that the projected revenues as a result of this transaction will not exceed those that would qualify it as a Class III railroad and will not exceed $5 million.

The earliest this transaction may be consummated is June 20, 2007, the effective date of the exemption (30 days after the exemption was filed). /4/

FOOTNOTE 4 On May 21, 2007, WSDOT filed a petition requesting that the Board partially revoke the class exemption as necessary to allow the exemption in this proceeding to become effective on June 1, 2007, rather than on June 20. That request will be addressed in a separate Board decision. END FOOTNOTE

If the verified notice contains false or misleading information, the exemption is void ab initio. Petitions to revoke the exemption under 49 U.S.C. 10502(d) may be filed at any time. The filing of a petition to revoke will not automatically stay the transaction. Petitions for stay must be filed no later than June 13, 2007, unless the Board grants WSDOT's petition to make the exemption effective sooner, in which case the due date for stays will be established in the Board's decision acting on WSDOT's petition.

An original and 10 copies of all pleadings, referring to STB Finance Docket No. 35024, must be filed with the Surface Transportation Board, 395 E Street, SW., Washington, DC 20423-0001. In addition, a copy of each pleading must be served on Mark S. Lyon, 7141 Cleanwater Drive, SW, Tumwater, WA 98501-6503.

Board decisions and notices are available on our Web site at http://www.stb.dot.gov.
Decided: May 24, 2007.

Saturday, December 19, 2015

On May 21, 2007, the Washington State Department of Transportation (WSDOT), a noncarrier, filed a notice of exemption under 49 CFR 1150.31 to acquire from Palouse River and Coulee City Railroad, Inc. (PCC), certain physical assets, operating rights, and underlying rights-of-way of eight rail lines, totaling approximately 296 miles, in the State of Washington.[1] The rail lines are sub-divided into three branches: (1) the CW Branch, between milepost 1.0 at Cheney and milepost 108.81 at Coulee City; (2) the P&L Branch, (a) the WIM line between milepost 0.0 at Palouse and milepost 3.85 at the Washington-Idaho State line, and (b) the P&L line between milepost 1.0 at Marshall and milepost 75.9 at Pullman; and (3) the PV-Hooper Branch, (a) the Hooper Jct.-Winona line between milepost 26.6 at Hooper Junction and milepost 52.3 at Winona, (b) the Thornton-Winona line between milepost 0.0 at Winona and milepost 31.7 at Thornton, (c) the Winona-Endicott line between milepost 52.3 at Winona and milepost 57.9 at Endicott, (d) the Endicott-Colfax line between milepost 57.9 at Endicott and milepost 77.7 at Colfax, and (e) the Colfax-Moscow line, (i) between milepost 0.0 at Colfax and milepost 18.7 at Pullman, and (ii) between milepost 75.9 at Pullman and milepost 84.05 at the Washington-Idaho State line.

According to WSDOT, PCC will continue to operate the P&L and CW Branches through May 31, 2007, but will cease providing service effective June 1, 2007. WSDOT will lease the P&L and CW Branches to third party operators under contracts awarded by public bid. PCC will continue operating the PV-Hooper Branch under its existing 15-year lease with WSDOT. WSDOT will not operate the lines, but will retain the residual common carrier obligation.

On May 18, 2007, EWGR and USRP jointly filed a petition requesting that the Board partially revoke the class exemptions as necessary to permit the exemptions in STB Finance Docket Nos. 35029 and 35030 to become effective on June 4, 2007, instead of on June 15 as provided by Board rule. EWGR states that it believes it can be prepared to commence operations on Monday, June 4, which would limit any service interruption to a weekend following PCC's cessation of operations on June 1, 2007. WSDOT and WIR also filed a joint petition on May 21, 2007, requesting partial revocation of the class exemptions as necessary to allow the exemption in STB Finance Docket Nos. 35024 and 35028 to become effective on June 1, 2007, instead of on June 20 and 10, respectively.

Petitioners state that shippers on the line would face a 2-week gap in critical rail service unless the effective dates of the notices are expedited. Petitioners add that all interested parties will have adequate notice of the proposed transactions even with the advanced effective dates, and they are aware of no opposition to these requests or to the transactions themselves.

In a letter filed on May 23, 2007, PCC states that it supports the petitions to expedite the effective dates of the notices. PCC points out that, because all of the subject transactions are to be consummated by June 1, 2007, a grant of the relief sought will enable WSDOT to meet its contractual commitments to PCC and benefit shippers on the branches without harming any interested parties.
We will grant the petitions. Nothing in the record before us indicates that PCC could lawfully cease service before the effective date of the notice filed by WSDOT in STB Finance Docket No. 35024. However, in order to facilitate a smooth transition, protect the interests of affected shippers, and comply with the request of a state agency, we will revoke the class exemption in part and grant specific individual exemptions with effective dates of June 1, 2007, and June 4, 2007, so as to advance the effective date of the four notices. Granting the petitions will have no adverse impact on any element of the rail transportation policy of 49 U.S.C. 10101.

This action will not significantly affect either the quality of the human environment or the conservation of energy resources.
It is ordered:
1. The petitions for partial revocation are granted, and appropriate individual exemptions are granted with effective dates as shown in the following ordering paragraphs.
2. The exemptions in STB Finance Docket No. 35024 and STB Finance Docket No. 35028 will be effective on June 1, 2007.
3. The exemptions in STB Finance Docket No. 35029 and STB Finance Docket No. 35030 will be effective on June 4, 2007.
4. Any request for a stay of the exemptions in STB Finance Docket Nos. 35024 and 35028 must be filed by May 31, 2007. Any request for a stay of the exemptions in STB Finance Docket Nos. 35029 and 35030 must also be filed by May 31, 2007.
5. This decision is effective on its date of service.

[1] The notice was initially submitted on May 10, 2007, but not docketed because WSDOT sought waiver of the required filing fee. On May 21, 2007, the appropriate filing fee was received. Because the notice could not be processed until the Board received the filing fee, May 21 is the official filing date.

[2] WIR currently operates over the involved lines as a contract carrier for PCC.
For Decision Attachments, go to: http://www.stb.dot.gov/decisions/readingroom.nsf/UNID/CAD8565A748A9A5F852572EB00548932/$file/38045.pdf.

Friday, December 18, 2015

After years of financial problems, legal wrangling and fears that the line might be abandoned altogether, an agreement was signed in Olympia Thursday that will ensure the long-term operation of Eastern Washington's Palouse River & Coulee City Railroad.

As area lawmakers who helped forge the plan looked on, Gov. Christine Gregoire signed a Memorandum of Understanding (MOU) that lays out a process to complete the sale to the state of the tracks, properties and operating rights for the CW (Cheney to Coulee City) branch of the three lines that together comprise the 372-mile short-line railway.

The railway runs between Coulee City and Moscow, Idaho. Keeping it open has been a nearly round-the-clock project for 9th District Rep. David Buri, who said the governor's action marked the achievement of one of the 9th District legislative team's top priorities for the 2007 session of the Legislature.

"This small railroad is a critical transportation link for farmers and growers, and a key component for future economic development in the area," said Buri, R-Colfax. "Agriculture is a key part of our state and regional economy, so it's not an overstatement that we believe keeping the grain-hauling trains running is a legitimate and worthy investment for the citizens of Washington."

Buri also credited his 9th District legislative colleagues, Rep. Steve Hailey and Sen. Mark Schoesler, and Rep. Mike Armstrong, R-Wenatchee, for their commitment and "tireless work" during months of meetings, talks and behind-the-scenes negotiations to help bring the final pieces together.

"Because of higher fuel costs, it's important to give farmers another alternative than just trucking to move their crops and other goods to markets or processing plants," said Schoesler, R-Ritzville and ranking Republican on the Senate Agriculture and Rural Economic Development Committee. "Today's action will help keep the short-line railroad in operation, which will benefit our region's agriculture industry and possibly help diversify the economy in the West Plains area."

Hailey noted that the railway provides a lifeline to farmers and other businesses in remote Palouse towns.

"Wheat farmers and other growers rely on the railroad to affordably ship their crops, but lots of other businesses such as seed companies and farm chemical dealers also use it to get their products to their customers. I'm very pleased that we're able to provide assurances to those people in the ag community that depend on the railroad that it's going to be there for them in the long term," said Hailey, R-Mesa. "People from both sides of the aisle have come together to get this done, and it's been a great effort by everyone involved."

The PR&CCR network is composed of three branch lines: the CW, the P&L and the PV Hooper. The CW branch runs from Cheney to Coulee City; the P&L extends from Marshall to Pullman; and the PV Hooper branch runs from Thornton to Winona and Hooper, and from the Idaho border through Pullman to Winona and Hooper.

The state Department of Transportation completed the purchase of the P&L and PV Hooper branches in September 2005. But negotiations to purchase the CW branch hit a roadblock, and owner WATCO, citing maintenance costs and debt, stopped operations on the branch that November. The company resumed service in August 2006.

The MOU specifies that May 31, 2007 will be the last day that WATCO will operate the CW and P&L lines. The company will continue to operate the PV Hooper line due to contracts they hold with the Union Pacific Railroad.

Still to be decided is whether the state or a new private operator will manage the CW and P&L lines' day-to-day operations

Thursday, December 17, 2015

The Palouse River and Coulee City Railroad's CW Branch, which runs between Cheney and Coulee City, has consistently run fewer carloads than needed to cover its operating costs and pay for annual railroad maintenance, according to a report conducted by Washington State University under contract to Washington State Department of Transportation.

WSDOT is working closely with legislators, other officials and stakeholders to support informed policy choices for the PCC Railroad. In late 2005, WSDOT contracted with WSU for an analysis of:
* The CW Line market: current and potential
* The impacts to state highways and county roads if the CW Line was no longer operational
* Financial results on the CW Line in 2005

The WSU market analysis of the CW line, which is owned and operated by Watco Company/Palouse River andCoulee City Railroad, Inc., also found that the most probable operating scenario is that the line will continue to be marginally profitable or unprofitable depending on shifting market conditions and shipper commitments. That leaves ownership of the line - whether by Watco, the state or a port entity - requiring an annual operating cost investment to maintain the rail line.

"The shippers we're working with know that they need to make carload commitments on the CW line, and this report supports that," said Barb Ivanov, WSDOT Freight Strategy and Policy director," said Barb Ivanov, WSDOT Freight Strategy and Policy director.

WSDOT negotiated with Watco, the railroad owner, to buy all three segments of the PCC lines for $7.998 million, which included cash and forgiveness of existing rehabilitation loans. The $6.486 million purchase of the P&L and Hooper branches, funded in the state's 2003-2005 budget, was finalized in November 2004.

Unfortunately, the remaining funds needed to finalize the deal for the third segment were not available at that time and were included in the state's 2005-2007 budget. WSDOT and Watco had completed all draft documents and intended to finalize the purchase of the CW branch in September 2005. Then, Watco withdrew its offer to sell the CW line on Sept. 13, 2005.

Meanwhile, Sen. Bob Morton, R-Orient, said BNSF Railroad issued a written offer to Watco on March 2 offering to provide haulage on the CW branch for a period of up to five years. BNSF said the offer would remain on the table for 45 days while the two companies work out a formal agreement.

WSDOT has ordered three separate, independent appraisals of the CW branch's Net Liquidation Value (NLV). The first appraisal by Cahill and Associates set the NLV at $1,397,458, as of February 8, 2006. The other two appraisals by HDR and Railroad Industries will be completed and reported to stakeholders by March 10. WSDOT recently sent a formal request to Watco to provide current net liquidation value, supporting information and a description of the CW line and any appurtenant facilities by April 1, 2006.

The WSU market and pavement analysis for the P & L and Hooper branches of the PCC, owned by WSDOT and operated by Watco, will be available April 15.

Wednesday, December 16, 2015

BN 1792, an X-Great Northern GP9 leads 1754 a former NP Geep on the weekly Mansfield local. The train has just left the mainline at Columbia River siding and has started up a draw through apple orchards that will take it through the Palisades on a climb to Douglas and the Mansfield Plateau where it will exchange these empty 40 ft. boxes for loads. The train was typically limited to 40 cars, and covered hoppers were off limits, which ultimately doomed the branch.

Thursday, December 3, 2015

While the historical railroads are gone, business in Warden is booming today. The links below are to Google Maps satellite images and are pretty current. You'll note the canola plant has been built just south of the old NP depot area, changing that spot the most.